The Numbers Behind Selling a Business

For most small business owners, selling your business is a once-in-a-lifetime event. These numbers are a result of looking at the M&A space as a whole and most likely will not apply specifically to YOUR business. However, they do give you a glimpse into the process and help give you the proper perspective when it comes to the process of selling a business.

  • 20% – The percentage of businesses listed for sale that will be sold. The top reasons companies don’t sell include: business is overpriced, the seller expects all cash, insufficient books and records, and business is in decline.
  • 80% – The percentage of the selling price actually paid by the buyer to purchase the business. Another way to look at this is the Seller’s asking price on average is 20% too high.
  • .44 – The average multiplier of Gross Sales is used to calculate the value of a small business with less than $5 Million in sales. This multiplier is derived from a dataset of 30,000 sold businesses across all industries, markets, and regions.
  • 2.41 – The average multiplier of Seller’s Discretionary Earnings is used to calculate the value of a small business with less than $5 Million in sales. This multiplier is derived from a dataset of 30,000 sold businesses across all industries, markets, and regions.
  • 10% – The percentage of businesses sold for all cash. The other 90% are purchased using some combination of seller financing and commercial financing
  • 20% – The percentage of the selling price carried by the sellers in the form of a Seller Note. Sellers should expect to carry at least 20% and usually more to make the sale of the business successful.
  • 50% – The percentage of deals that fall apart during the due diligence process. Most common reasons include misrepresentation of the numbers, cold feet, seller’s remorse, or the inability to arrange to finance, transfer licenses and contracts, or negotiate a lease
  • 1% – The percentage of buyers who inquire about a business listed for sale and then actually complete the process and own the business. Another way to look at this is that 99% of all buyers are just “tire kickers.”